As well as hitting the poorest through a freeze on working-age benefits, the Tories may also be planning to hit them again with a hike in VAT.
As well as hitting the poorest through a freeze on working-age benefits, the Tories may be planning to hit them again with a VAT hike
Just 24 hours after making a conference speech in which he promised tax cuts for ’30m people’, David Cameron has refused to rule out an increase in the rate of VAT to pay for it.
The promises made by Cameron yesterday, which included raising the threshold for those paying the 40 per cent rate of income tax and increasing the personal allowance, are set to cost over £7bn to fund.
Asked today about his party’s £7bn spending committment, Conservative Party chairman Grant Shapps refused to rule out increasing the rate of VAT in government:
Jo Coburn: Are you ruling out a rise in VAT?
Grant Shapps: Well I have absolutely no intention of writing future Budgets on your programme…
BBC Two: Daily Politics, 2 October, 2014
The government has already put up VAT once, from 17.5 per cent to 20 per cent in January 2011, and is now refusing to rule out doing so again. VAT is considered a regressive form of taxation as the proportion of an individual’s taken by the tax falls as they move up the income scale – as this (albeit dated) graph from Tax Research UK demonstrates:
And as the report states:
“On this basis an unambiguous conclusion can be drawn: VAT is regressive.”
So as well as hitting the poorest third of the population through a freeze on working-age benefits, the Tories may also be planning to hit them again through a hike in VAT.
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19 Responses to “Tories refuse to rule out VAT increase”
Peter Martin
Well the banks have to some extent. Lending has picked up in the last few years in the USA, the UK leading to some concerns that another credit bubble may be developing in the housing markets. Banks lend when it makes sense for them to do so. This means they need to be confident that their loans will repaid. When that confidence wanes, when property or share markets start to look overvalued, they become increasing reluctant to lend. The words credit and crunch start to be used. It doesn’t mean the banks have run out of money though.
ALL tax levying decisons are in the hands of politicians in democratic countries. UK politicians haven’t done that well so obviously there’s no secret knowledge. US politicians have done better but could have done better still. European politicians have done spectacularly badly. To a large extent that’s because, in the EZ, the’ve lost control of their economies by handing control to unelected bodies ie the ECB, the IMF , the European commission and so can no longer be considered to be democracies in the normal sense of the word.
137point036
So the banks have their hands on the throttle; not companies, not the government. That seems a bit unfair on the rest of us.
I do not contest that politicians make decisions. My question is what knowledge base are they tapping in to makes them the right people to make the decisions? Where did George Osborne learn the trade?
Peter Martin
Banks do what is in their own interest. When they over-lend they cause a boom and create asset bubbles. When they under-lend it all comes to a crashing stop and boom turns to bust.
This can be counteracted by sensible government intervention of course – so it is being over-simplistic to blame the banks for everything. Interest rates can be increased to slow down lending and fiscal policy can be slackened to prevent the economy going into recession. The problem is that the mainstream of the economics profession is wedded to the idea that fiscal policy should always be keep as tight as possible and that monetary policy should be kept as loose as possible.
Consequently we have interest rates which are too low and cannot fall any further. The sensible approach would be too gradually increase interest rates but allow the deficit to rise to stimulate the economy. Unfortunately George Osborne has learned his trade from those who reject that kind of Keynesian thinking, but there are signs that he’s saying one thing but doing another on the deficit, so knows that a bit of Keynesian stimulus doesn’t do any harm from time to time.
The cynics would say that was because an election is due next year. I’d have to say they are probably right and it will be back to full austerity shortly afterwards.
137point036
OK, so the key decisions are made by the banks and George Osborne. We could not be in better hands. And George has learned his trade somewhere. Just like Fred Goodwin and Bob Diamond.
Guest
And you get the NHS, etc.
Or would you rather people pay for private healthcare, massively increasing their bills, as America shows?